Real estate investment trusts are on track to buy more than $100 billion in mortgage-backed securities by the end of the year, according to JPMorgan Chase (JPM)
REITs buy, develop, manage and sell real estate assets and occasionally securitize those assets as well. Investment bank Keefe, Bruyette & Woods recently estimated
the total aggregate value for these firms to be as high as $42 billion, up from $30.4 billion at the end of last year.
"Overall, the supply-demand picture for mortgages looks balanced," Chase analysts said. "On the demand side, REITs’ appetite for mortgages has been surprising year to date."
These companies, such as New York-based Annaly Capital (NLY)
, are also increasing their fundraising for making these purchases. REIT equity offerings spiked in the first quarter of 2011, exceeding $7 billion, which is more than triple the previous quarter. Equity offerings have since fallen off but still remain over $2 billion as of the second quarter of 2011.
In comparison, banks bought $45 billion in MBS so far this year, on track to reach the analysts' forecast of between $75 billion and $100 billion.
REITs, at an 8-to-1 leverage, are right there with them.
"The equity raised this year should translate into north of $100 billion of MBS buying in 2011," analysts said.
Write to Jon Prior
Follow him on Twitter @JonAPrior